SMM Evening Comments (Aug 3): Shanghai Nonferrous Metals Closed Mostly with Losses amid Rising Risk Aversion

SHANGHAI, Aug 3 (SMM) – Shanghai nonferrous metals closed mostly with losses as risk aversion sentiment rose amid geopolitical tensions.

Shanghai copper slid 0.45%, aluminium rose 0.91%, lead lost 0.59%, zinc dropped 1%, tin shed 1.86%, and nickel declined 1.88%.

Copper: The most-traded SHFE 2209 copper closed down 0.45% or 270 yuan/mt at 59,780 yuan/mt, with open interest up 2,429 lots to 157,522 lots.

On the macro front, San Francisco Fed President Daley said Tuesday that the Fed's task to bring down inflation is "far from completion", adding that Fed officials "remain steadfast and united" in their mission to achieve price stability. Job vacancies fell the most in more than two years, with demand for workers in retail and wholesale trade declining, but overall the labour market remained tight.

In the spot market, spot premiums slumped amid constant inflow of copper imports. Traders, who purchased spots and sold off the futures contracts when SHFE front-month and next-month backwardation stood at 400 yuan/mt, now sold off the spots in panics, and the premiums almost halved. Standard-quality copper was in premiums of 180 yuan/mt in morning trade, but there were merely any inquiries. Then the premiums quickly dropped to less than 100 yuan/mt, and some were even lowered to 60 yuan/mt. The spread between good and standard-quality copper remained around 20 yuan/mt.

Aluminium: The most-traded SHFE 2209 aluminium closed up 0.91% or 165 yuan/mt to 18,250 yuan/mt, with open interest down 3,282 lots to 165,238 lots.

On the fundamentals, supply-side pressure remains in place, and production resumption in low-cost areas can be expected after the profits restored. However, the demand side remained poor.

Lead: The most-traded SHFE 2209 lead closed down 0.59% or 90 yuan/mt at 15,160 yuan/mt, with open interest down 2,201 lots to 56,557 lots.

On the macro front, the intensive geopolitical situations centering Taiwan interfered with the commodity market, triggering extensive risk aversion sentiment, and the non-ferrous metals prices dropped slightly. On the fundamentals, the supply and demand of lead posted few changes recently, and the social inventory still recorded small declines. But there is still possibility that lead inventory may rise following concentrated delivery stimulated by rallying lead prices.

Zinc: The most-traded SHFE 2209 zinc closed down 1% or 240 yuan/mt at 23,695 yuan/mt, with open interest down 1,702 lots to 116,286 lots.

In the spot market, the traders actively sold off rather than shifting their futures positions, and quoted mainly against SHFE 2208. In addition, the market transactions further picked up after SHFE zinc dropped today. On the consumption side, the forward market situation is hard to predict, while currently the downstream mainly purchased on rigid demand, extending the weakness on the demand side. To sum up, the support from the fundamentals, weakened, and the market players shall stay alert to sentiment volatility.

Tin: The most-traded SHFE 2209 tin closed down 1.86% or 3,640 yuan/mt at 192,390 yuan/mt, with open interest down 1,964 lots to 52,672 lots.

In the spot market, the number of quotes from smelters dropped compared with yesterday in morning trade, and mainstream smelters were less firm to their quotes apart from a few insisting on high prices. The number of quotes from the traders also dropped, and the sources of non-deliverable brands were tight, while the spot premiums were largely changed from a day ago. The downstream purchased on rigid demand today following concentrated purchases a day ago.

Nickel: The most-traded SHFE 2209 nickel closed down 1.88% or 3,330 yuan/mt at 174,250 yuan/mt, with open interest up 1,639 lots to 82,891 lots.

Falling LME and SHFE nickel inventory underpinned nickel prices. On the supply side, considerable import profits are likely to shore up pure nickel imports. On the demand side, the downstream players turned away from high nickel prices.

[Disclaimer: The above representation and data is based on market information SMM believes to be reliable at the time of acquiring as well as the comprehensive assessment by SMM research team, and any and all information provided in this article is for reference only. This article does not constitute a direct recommendation for investment or any decisions in any form and clients shall act on their own discreet and any decisions made by clients are not within the responsibility of SMM.]